Anti-SLAPP motion

J. Niley Dorit v. Noe — Major Anti-SLAPP Victory for Morris & Stone

Another Day at Morris & Stone

J. Niley Dorit v. Noe

Another victory in the Court of Appeal by Morris & Stone. And while this case did not arise from a defamation claim, it did involve an anti-SLAPP motion, and thus will provide precedent for defamation claims in that context.

Here are the simple facts.

In January 2018, our client (we’ll call him Jack because that’s his name) hired an attorney named J. Niley Dorit to evaluate the medical records of Jack’s deceased mother for a potential medical malpractice suit against her doctors. The parties signed a fee agreement in which Jack agreed to pay Dorit a $10,000 non-refundable retainer fee. This sum was intended to cover Dorit’s time spent evaluating the claim, as well as “the costs of additional medical records and/or expert medical review if indicated.” The agreement contained an arbitration clause, which stated, “Should there arise any disagreement as to the amount of attorneys fees and/or costs, Client agrees to enter into binding arbitration of such issue or dispute before the Bar Association of San Francisco (BASF).”

On March 19, 2018, Dorit called Jack on the phone to present his analysis of the records. According to Dorit, Jack cut him off soon after Dorit began his presentation. Jack asked Dorit simply to provide his ultimate conclusion about the potential malpractice claim. Dorit said he did not think a malpractice claim was viable.

Jack was frustrated, feeling that Dorit had not provided $10,000 worth of services, especially given that he apparently had not consulted any medical experts. Conversely, Dorit felt that his experience with medical malpractice cases qualified him to review the file sufficiently to determine if a malpractice case was warranted. The medical file was huge, so Dorit felt he had earned his fee in examining the file.

The Mandatory Fee Arbitration Act

This is the sort of situation envisioned when the MFAA was was created. MFAA stands for Mandatory Fee Arbitration Act. Under California law, a client can challenge the fees charged by their attorney using this State Bar regulated process. It is designed to be very informal, and the arbitrator is not even required to follow the rules of evidence. It is a quick, low-cost way to have a fee dispute decided. Often the attorney fees involved in a fee dispute are relatively nominal, and it would never make economic sense to have to sue in court, let alone hire yet another attorney to do so. Rather than to force clients to stew in their own juices over the anger of having no recourse, the MFAA provides a quick review of the fees paid. And contrary to popular belief that the process is rigged in favor of attorneys, the MFAA arbitrators are very strict in determining if the attorney has observed all legal requirements.

Thus, a perfect process existed for Jack and Dorit to have the dispute decided, without going to court or even squaring off at ten paces. They submitted the fee dispute to MFAA arbitration. They presented their evidence to the Arbitrator, and ultimately he found in favor of Dorit, and allowed him to keep the $10,000 fee, awarding Jack nothing. Jack even had to cover the filing fee.

There are a couple of important things to know about the MFAA process. By law, a client always has the option to submit any fee dispute to arbitration. Sometimes it is the attorney who wants to sue to recover unpaid fees, but the attorney cannot take the matter to court without first giving the client the option to submit the dispute to arbitration. At that point, the arbitration is non-binding, unless the client then agrees to make it binding. If it is non-binding, then either party is free to reject the award of the Arbitrator and proceed to court.

Additionally, since the arbitration is so informal, and does not follow the rules of evidence, nothing from the arbitration can be used in any subsequent court proceeding. For example, had this matter proceeded to trial, Dorit would not have been permitted to bring up the fact that he had won the arbitration, or to bring up any of the arbitration testimony. It’s simply as though it never happened. This is because it would be entirely unfair to have a situation where clients are encouraged to go to an informal arbitration without the benefit of legal counsel, but then use the results of that hearing against the client in some other more formal forum, such as a trial.

OK; you now know everything you need to know about MFAA arbitrations. Back to our tale.

When we left our heroes, Dorit had won, and Jack was very unhappy with the result. But Jack has a code, and that code dictated that he had lost fair and square, and he would live with that result. Even though he would have been free to reject the conclusions of the Arbitrator, he did nothing and allowed the award to become final.

Dorit sues for Malicious Prosecution

But Dorit was not as accommodating. Dorit was upset that Jack had dared to question his entitlement to the $10,000 in fees, which he felt had been a malicious thing to do, so he sued Jack in San Francisco Superior Court for Malicious Prosecution.

This is where the, “well that can’t be right” part comes in. Jack brought me the complaint, and asked me to defend him. I thought I must be missing something. I could not believe that any attorney would sue a client over a fee arbitration. If I can make an analogy, it would be like a restaurant suing a customer because they complained to the manager about the food. Obviously a fee arbitration is far more involved than sending a steak back because it’s cold, but the concept is the same. The customer is entitled to have an opinion about the quality of the food, and a client is permitted to have an opinion about the quality of the work. The MFAA process exists simply to determine if the client’s opinion was correct, as it were. It’s not something you sue over.

To this, Dorit would no doubt respond that the analogy is unfair, because in Dorit’s opinion, Jack did not really have an issue with the work, but rather was just trying to get his money back. Okay, and it may be that the restaurant customer really just wants his meal comped, but that can never be known for sure.

So I’m looking at Dorit’s complaint dumbfounded, and I quickly determined that Dorit’s lawsuit was a SLAPP, since it sought to challenge Jack’s use of “any other official proceeding authorized by law,” namely, the MFAA process. Dorit’s lawsuit was the quintessential SLAPP, because he was suing Jack for utilizing the very process created for fee disputes. If allowed, then the MFAA process might as well be scrapped. No rational client would arbitrate a fee dispute if they faced a potential malicious prosecution action. I could not let Dorit’s action stand, and I wanted to create a precedent so other attorneys would not follow his example.

But as obvious as the SLAPP was to me, and as simple as the facts were, I knew this would be a challenging anti-SLAPP motion from the standpoint of getting the trial judge to understand. Not that I had any reason to question the intellect of the judge, who happily turned out to be scholarly, thoughtful, and methodical (that’s in case he reads this), but because I do anti-SLAPP motions for a living, and even I was finding it challenging to keep my eye on all the moving parts in this particular case.

Here is why.

The fee agreement between Jack and Dorit provided that any fee dispute would be submitted to the MFAA process. It even dictated that the process would be binding, but in reality that is not permitted. Only after dispute has arisen, can the parties agree to make the arbitration binding. But I digress.

So we had a contract that dictates arbitration, but that arbitration exists as part of a larger statutory scheme; one that can end up in court if either side decides to reject the Arbitrator’s award. And therein lies the rub. Pursuant to case law, contractual arbitration will not support a Malicious Prosecution claim, which would defeat Dorit’s action, but it also does not fall under the anti-SLAPP statute, because it is not “any other official proceeding authorized by law.” Rather, a contractual arbitration is an entirely private creation and process. Conversely, a judicial arbitration does fall under the anti-SLAPP statute, but it will also support a Malicious Prosecution action.

The Challenge

My task, therefore, was to solve this conundrum. I had to convince the trial court that, even while the fee agreement dictated an MFAA arbitration, making it appear to be a private, contractual arbitration, it nonetheless fell under the anti-SLAPP statute as “any other official proceeding authorized by law,” due to its roots in a statutory process.

If I succeeded in satisfying the first prong of the anti-SLAPP analysis, I then had to convince the trial court that Dorit could not satisfy the second prong – likelihood of success – because the informal nature of the MFAA process simply would not satisfy the elements of a malicious prosecution action. Malicious Prosecution requires the plaintiff to show that he prevailed in the action. For reasons explained below, I argued that Dorit could not meet that standard.

So, I filed my anti-SLAPP motion, and . . . drum roll . . . it was denied by the trial court. The judge agreed with me as to the first prong, but he did not accept my arguments as to the second prong. Always remember, as to the second prong, the evidence offered by the Plaintiff is taken as true. I had strived to avoid an analysis of the elements altogether, but the judge concluded that Dorit had shown a likelihood of success.

I will say that on one point the judge really missed the ball. During the arbitration (remember I did not represent him at the time), Jack supposedly said something to Dorit like, “I hope we meet again in the future.” I don’t ascribe any ominous meaning to such a statement. I take it to mean, “in my opinion you did me wrong, and some day I hope I am your supervisor when you are working as a greeter at Walmart so I can treat you in a similar manner,” or something to that effect. But Dorit offered this as proof of malice, and the judge seemed to buy into that theory. But that makes no sense. Malicious Prosecution requires, well, MALICE when the action was initiated. Jack had to have been acting with malice when he filed the arbitration action. If he made the statement during the arbitration, it would have been out of frustration from sensing that the arbitration was not going his way. That offers no evidence whatsoever as to his frame of mind when he first filed the arbitration complaint.

But anyway, my anti-SLAPP motion was denied. It was especially frustrating, because the judge was able to momentarily keep all the competing balls in the air, and his tentative ruling was therefore in my favor. But after oral argument, the judge reversed himself. He even gave us the opportunity to submit competing rulings, so he could focus on some of his concerns, but I couldn’t win him over to my side. I felt like I had snatched defeat from the jaws of victory. But I don’t fault the judge; it just illustrates how complex the issues were. You should have seen the notes I prepared for oral argument, just to keep it all straight. Picture Venn diagrams within Hesse diagrams.

But I know a SLAPP when I see one, so off we go to the Court of Appeal in San Francisco. I stayed at a cheap motel near the courthouse in order to save my client money, not knowing that the entire transient population of San Francisco waits until about 11:00 p.m. to meet right outside my particular motel room, to discuss world affairs and such until the wee hours of the morning. Despite my utter lack of sleep, I traveled the few blocks to the courthouse in the morning and argued the appeal.

One of the three justices was a judge sitting by assignment. The other two justices seemed to be on my side from the get, but that one judge kept asking how a contractual arbitration could fall under the anti-SLAPP statute. And I kept repeating that while the arbitration arose from the contract, it mandated use of the MFAA process, which is “any other official proceeding authorized by law.”

Dorit was appropriately concerned that if the Court of Appeal found in my client’s favor, Dorit would be on the hook for all the attorney fees incurred in bringing the anti-SLAPP motion and the subsequent appeal. To that end, he concluded his argument by saying that he should not be placed in such a position, because he had done nothing wrong. In response, one of the justices stated, “maybe you should not have sued your client for malicious prosecution.” Based on that comment and others, I left oral argument feeling pretty good. But you never know with Appellate Justices. Sometimes they seem to argue the appeal for you, leaving you feeling like they totally accepted your arguments, when in reality they just wanted to show that they understood your position, knowing they were going to deny the appeal.

The Opinion Cometh — J Niley Dorit v. Noe

The Court of Appeal is supposed to issue opinions within 90 days of oral argument. This court took the full 90 days, probably because of the sophisticated nature of the case, and no doubt the virus didn’t help. I checked again for an opinion on the 90th day, and found nothing. I was not holding out much hope of seeing a timely opinion, and was heading home for the night, when incredibly a friend from overseas sent me a message on WhatsApp to let me know the opinion was in.

In a unanimous decision, the Court of Appeal reversed and ordered the trial court to grant the anti-SLAPP motion “and to conduct further proceedings consistent with this opinion,” meaning entering the judgment in favor of Jack, and considering the motion for attorney fees. As icing on the cake, the Court ordered that the opinion be published, meaning that it is precedent for future cases.

Especially gratifying was the Court’s concluding thoughts, which adopted a novel theory we had argued. As I mentioned earlier, by statute nothing from the MFAA arbitration can be used for other purposes. A claim of malicious prosecution requires the plaintiff to allege and prove that he, she or it prevailed in the underlying action. But if nothing from the arbitration can be used, then how would Dorit ever be able to establish that he prevailed?

Simply stated, the Court of Appeal concluded that Dorit would never be able to satisfy the second prong of the anti-SLAPP analysis, because he could not even show that he had prevailed at the arbitration.

In the end, we achieved four important goals. Dorit was stopped, the client was saved from protracted litigation, he will recover his attorney fees for both the motion and the appeal, and a precedent now exists that will prevent attorneys from suing their clients for utilizing the MFAA process.

A more detailed discussion of J. Niley Dorit v. Noe, with the added reasoning of the court, can be found here.

[UPDATE:] On October 1, 2020, the Court (the same judge who initially denied the motion) awarded Jack over $74,000 in costs and attorney fees, for the time and expense of bringing the original motion and subsequent appeal. Dorit had argued that since I am the Sultan of SLAPP, the Pharaoh of Free Speech, and the Master of Motions,  the SLAPP issues “could have been easily addressed with less than 3 hours of work at the trial court and the Court of Appeal.”  However, the Court found that not even I could respond to these sophisticated issues so quickly. And in doing so, it held that I am “notably modest.” Another important precedent created by this case.

California Prohibits “You Can’t Review Me” Contracts

no criticism contractsFrom my recollection, doctors were the first to try this nonsense. They would slip in a provision in all the intake paperwork, stating that the patient agrees not to post any negative reviews about the doctor, with a $500 penalty if the patient violates the clause.

These contract clauses gained more and more popularity. I came across one in the repair estimate I received from my Ford dealership.

Occasionally, I would receive a call from a doctor or some other business, asking me to write a letter to a customer, demanding that they take down a review based on such a contract clause. I was happy to demand removal if the posting was defamatory, but I would not agree to use the clause as a basis, because I found them so offensive.

Apparently the California Legislature found them offensive as well, and created Civil Code section 1670.8. This section makes it ILLEGAL to include one of these “you can’t review me” provisions in any contract. If a business includes such a provision in a contract, it can be hit with a penalty of up to $2,500, and $5,000 for each subsequent violation, even if it never seeks to enforce the provision.

If you encounter a contract with “you can’t review me” language, then contact me immediately. I’d love to take these to court.

Here is section 1670.8 in its entirety:

1670.8. (a) (1) A contract or proposed contract for the sale or lease of consumer goods or services may not include a provision waiving the consumer’s right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.

(2) It shall be unlawful to threaten or to seek to enforce a provision made unlawful under this section, or to otherwise penalize a consumer for making any statement protected under this section.

(b) Any waiver of the provisions of this section is contrary to public policy, and is void and unenforceable.

(c) Any person who violates this section shall be subject to a civil penalty not to exceed two thousand five hundred dollars ($2,500) for the first violation, and five thousand dollars ($5,000) for the second and for each subsequent violation, to be assessed and collected in a civil action brought by the consumer, by the Attorney General, or by the district attorney or city attorney of the county or city in which the violation occurred. When collected, the civil penalty shall be payable, as appropriate, to the consumer or to the general fund of whichever governmental entity brought the action to assess the civil penalty.

(d) In addition, for a willful, intentional, or reckless violation of this section, a consumer or public prosecutor may recover a civil penalty not to exceed ten thousand dollars ($10,000).

(e) The penalty provided by this section is not an exclusive remedy, and does not affect any other relief or remedy provided by law. This section shall not be construed to prohibit or limit a person or business that hosts online consumer reviews or comments from removing a statement that is otherwise lawful to remove.

Jones Day Threatens SLAPP Suit Against Detroit-Area Blogger

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Jones Day, the third largest law firm on the planet, is focusing their weighty legal acumen and collective wrath upon the head of one lone Detroit-area blogger who dared to poke serious fun at their activities in the Detroit bankruptcy proceedings. Also found in the blogger’s sardonic cross hairs is one of the firm’s former associates, Kevyn Orr — aka, Detroit’s Emergency Manager — both parties are being scorched in parody by the outspoken blogger over their joint roles in looting the already decimated city coffers.

Source: www.democracy-tree.com

Business clients call to ask me to examine some review that was posted on-line, wanting to sue for defamation. When I advise them that the comments are permissible statements of opinion and not actionable defamation, the next question is almost always, “but can you at least send a cease and desist letter to make him take it down?”

No, I can’t, because it would be a toothless threat designed to intimidate someone out of exercising their right of free speech.

Apparently the law firm of Jones Day does not operate under the same standard, especially when its own ox is being gored. As you’ll see from the letter they sent, the firm claimed that a blogger could not use its name in order to criticize it. This is a common ploy, used in the hope that the recipient of the threatening letter won’t know any better. Free speech would be dead indeed if critics could not name the people and entities they are criticizing. Just as Stephen Colbert can use the name and even the logo of Domino’s Pizza in his parody news report, this blogger was free to use the name and logo of Jones Day, and any action by Jones Day would have been a clear SLAPP suit. Here is the letter that the Electronic Frontier Foundation sent in return, calling Jones Day’s bluff.

Anti-SLAPP Victory: Reality Television is Free Speech

storage warsThe reality show “Storage Wars” has created a case that offers some important anti-SLAPP (and litigation) lessons.

In December, David Hester filed a lawsuit against A&E Television Networks alleging that producers of Storage Wars rigged the reality-television series by salting storage lockers with valuable items before they were auctioned off to buyers. The producers deny the claim, pointing out that they have no access to the lockers before they are sold, but it could be that they are adding the items with the assistance of the buyers, after the purchase, to make the show more entertaining. After all, if the show was nothing but lockers full of expired National Geographic magazines, that would get boring fast. But I digress.

According to his lawsuit, Hester was told that his contract would be renewed for season four, but after complaining about the “fraud” that was being perpetrated on the viewers, he was told his services would no longer be required. He sued A&E and another entity for wrongful termination (huh?), breach of contract, breach of the covenant of good faith, unfair business practices, and declaratory relief.

Lesson 1:  For every wrong, there is not necessarily a remedy.

Some attorneys just never get this. If I hire you for my television show, and I have the contractual right not to renew that contract at some point in the future, and you do something I don’t like, such as telling me you don’t like the way I am running the show that I’m paying you $750,000 to be on, then I just may decide not to keep you around. You are not some bastion for the public, given the task of making sure my show is pure. All reality shows are faked to some extent, and the viewers all know they are faked (although, incredibly, I did once run into a guy who thinks Ghost Hunters is totally legit).

It may stink that Hester got “fired” for wanting to keep the show honest, but if he wanted to make sure he never got fired for criticizing the show, the he should have added a “you may not fire me when I tell you your show stinks” clause to his contract.

Lesson 2:  A faked reality show is an expression of free speech.

Can you sue Stephen King when you find out Pet Sematary [sic] is not based on reality? Then why did Hester and his counsel think they could sue A&E for its fictional Storage Wars? Not surprisingly, A&E’s attorneys asked the same question in the form of an anti-SLAPP motion. The motion was a no-brainer, because it involves a free speech issue of public interest, bringing it within the anti-SLAPP statute, and there was zero chance of Hester prevailing on at least one or more of his causes of action, so the second element was a lock. As I have explained many times here, a SLAPP suit will often make no mention of defamation or any other obviously SLAPPable claim, but nonetheless will be a SLAPP.

Lesson 3:  Betting wrong on a SLAPP can be very expensive since some courts continue to rubber-stamp huge fee applications.

There is case authority for the proposition that if a court finds that a fee application on an anti-SLAPP motion was inflated, it can deny fees altogether, but I have yet to see a court follow the rule. In one case, I was brought in to challenge a fee application, and persuaded the court to knock off about 40% of the hours that were requested by the attorney who had successfully brought the anti-SLAPP motion. When the court stated in was reducing the fees by that amount, I reminded it of the authority that it could deny the fees altogether since defense counsel had been caught padding the bill. The judge responded, “Padding, what padding? I did not see any padding.” Well your honor, if the hours were all legitimate, then you should have awarded the full amount. But since you agreed with me that 40% of the time was inappropriate, then I would describe that as padding.

I have not reviewed the invoices for the anti-SLAPP motion in this case, nor do I know what other activities if any followed the original anti-SLAPP motion (for example, the plaintiff will sometimes request permission to conduct discovery following the motion and that takes time), so I offer no opinion on whether the time spent was appropriate. In the end, even after reducing the attorney fees requested by defense counsel, the attorney fees awarded still exceeded $120,000.

Aaron Morris

Morris & Stone, LLP

Tustin Financial Plaza
17852 17th St., Suite 201
Tustin, CA 92780

(714) 954-0700

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View Aaron Morris, Trial Attorney and Partner at Morris & Stone, with emphasis on Free Speech and Defamation Law.

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